Rent deposit provision ruled constitutional.

The city's real estate industry scored a major victory recently in its ongoing battle with tenant groups and legal services organizations regarding the so-called "deposit of rent" law.

Justice Edward H. Lehner of State Supreme Court has held that the deposit of rent provision, enacted as part of the Rent Regulation Reform Act of 1997, "is constitutional on its face" - thus rejecting the constitutionality challenge brought by legal services organizations and tenant groups. The challenge, according to the city's largest organization of building owners, had been impeding the implementation of the deposit of rent provision.

Joseph Strasburg, president of the Rent Stabilization Association (RSA), said he is hopeful that Housing Court judges will fully implement the requirements of the rent deposit provision now that the constitutionality issue has been resolved.

"Judge Lehner's ruling is significant because, up to this point, Housing Court judges had been reluctant to fully implement this portion of the new law until the constitutional arguments were litigated to conclusion," said Strasburg, who represents 25,000 building owners of some one million rent stabilized apartments in the five boroughs.

"There is no longer a reason for anyone to doubt the wisdom of what the legislature enacted in 1997. Tenants have raised false fears about the constitutionality of the rent deposit provision." Strasburg said.

Judge Lehner agreed that tenant fears were unfounded, noting in his decision that the plaintiffs' legal aid lawyers stated that in all tenant/landlord deposit of rent cases handled by their offices during the approximate one year since the new provision has been in effect, the issue had been resolved. Furthermore, Judge Lehner said the attorneys cited no decided case dealing with the constitutionality of the deposit requirement.

The deposit of rent provision mandates the deposit of rent by a tenant with the courts in certain instances of dispute between an owner and tenant. At the conclusion of a case in which rent is deposited, the monies deposited with the Court are either paid to the owner or returned to the tenant, depending on who receives the favorable ruing. The rent deposit requirement does not apply to cases that are resolved quickly, and only impact cases that are prolonged.

Tenants had held numerous rallies outside Housing Court, claiming that the deposit of rent law was unfair because it requires tenants to pay their rents into court while the case was unresolved. In promulgating the new provision in 1997, the state legislature recognized the validity of owners' arguments that Housing Court proceedings often end with owners losing out on rental income that is needed to operate their buildings and make improvements that benefit other tenants. Owners have long argued that tenants often needlessly prolong eases in Housing Court to avoid paying rent, and when owners win eviction cases, the victories are hollow because tenants skip without paying back rent.

The court decision is the result of a case brought against the state, Lang vs. Pataki, after a tenant was sued an owner for failure to pay rent. RSA intervened as a participant based on its capacity as the city's largest representative of property owners.